EDITORIAL: Oil Price Review
| Date | 01 April 2016 |
| Published date | 01 April 2016 |
| DOI | http://doi.org/10.1111/oet.12369 |
OIL PRICE REVIEW
First Quarter 2016
Dated Brent crude 25 December close: $37.22 per barrel
26 December-1 January Thursday close: $36.61
Crude oil prices eased in thin trading between the
Christmas and New Year holidays.e bearish tone that
characterized the period before Christmas continued
aerwards, though there was a slight rally on the last
tradingdayoftheyearastraderscoveredshortpositions
in advance of the New Year holiday shutdown. Funda-
mentals, including high stock levels, suggested that there
were more price falls to c ome for both crude and rened
products.
2-8 January Friday close: $31.67
Crudeoilmarketsopenedonanupwardnoteastraders
returned to their desks on Monday morning amid news
that Iran had reacted angrily to the execution of a Shiite
cleric over the weekend. Protesters attacked the Saudi
embassy in Tehran, which was followed by the severing
of diplomatic relations wit h Iran by Riyadh. It soon
dawned on the trading fraternity that the spat between
the two countries was likely to have no eect on remov-
ing excess production from the market, and prices began
to fall again, helped downwards by falling stock markets
across the world, suggesting a general lack of condence
concerning global economic growth. A rising US dollar
and ever-growing inventories completed the gloomy
picture and crude oil was down by $5/bbl on the week
by Friday.
9-15 January Friday close: $28.80
Brent crude went below $30/bbl for the rst time in
12 years, falling as low as $27.88 in futures trading before
rallying slightly. Other North Sea crudes followed suit,
taking Dated down to $28.85/bbl at one stage. Sweet
crudes were hit by high inventory levels. In sour mar-
kets, the price of Urals fell in relationto North Sea Dated
as a result of the increasing availability of crude from
Iraq. Medium sweet and sour crudes went down under
pressure from high middle distillate stocks on both sides
of the Atlantic. Despite the general gloom amongst s ell-
ers about crude oil prices, some grades improved their
position relative to the North Sea benchmarks. Falling
US production and the prospect of rising US exports of
crude oil following the ending of export restrictions by
theUSCongressraisedthepriceofWTItoa17cent
premium above Brent aer ve years of almost contin-
uous trading at a discount to the UK marker. Some of
the lighter sweet crudes and condensates from Africa,
South East Asia and Australasia also improved relative
to North Sea pric e levels as a result of st rong Asian
demand for gasoline. One US crude, North Dakota Sour,
made history by havi ng the misfortune to be quoted at a
negative level, when rener,Flint Hills Resources, posted
apriceofminus 50cents/bbl as the price it was willing to
pay for the crude.
16-22 January Friday close: $30.46
A new note of bearishness was introduced into global
crude markets–especially sour crude markets– with the
announce ment on Januar y 16 that Iran had satised the
UN’s International Atomic Energy Agency’s inspectors
that it had reduced the processing of uranium and shut
down facilities that could havebeen used to manufacture
nuclear weapons. As a result, sanctions imposed by the
EU on trading with Ir an were lied along wit h some,
although not all those imposed by the US. Iran said
that the liing of sanctions would enable it to export
an additional 500,000 bpd within six months. Crude oil
prices reacte d accordingly and fell, but rose at the end of
the week on news of possible nancial stimulus packages
in both the EU and Japan, nishing the week in positive
territory.
23-29 January Friday close: $33.14
Crude oil prices fell early in the week as traders began to
fret about the prospects of additional exports from Iran,
but rallied aer Iraq’s Oil Minister hinted at a possible
cut in production by both Saudi Arabia and Russia. e
prospects for this appeared to improve when the head of
Russia’s state pipeline agency, Transne, said that talks
between the two countrieswere imminent. A rise in most
major worldstock markets addedto the general mood of
bullishness.
30 January-5 February Friday close: $32.35
Crudeoilpriceseasedasdemandformanygradesfell.
Some sellers of North Sea crude sought markets in Asia
in lieu of reneries in Europe, where demand was slack,
especially for light, sweet crudes owing to weak naphtha
demand. West African barrels similarly were oered to
buyers east of Suez. Rising Russ ian exports caused prices
of Urals to weaken in Europe. Sour crudes remained
strong in Asia, however, with good demand for most
Persian Gulf grades. Products were in plentiful supply
across most markets. Demand for naphtha and heavy
fuel oil was down.
6-12 February Friday close: $31.80
Prices fell further as market fundamentals reasserted
themselves, as demand remained lacklustre and sup-
pliesabundant.Stocklevelsmeanwhilecontinuedto
rise. Europe was especially aected by the imbalance
between demand and supply as reners shied away from
sweet crudes just as increasing volumes became available
from the North Sea. Light, sweet Afr ican blends fell
for the same reason. In the US, on the other hand,
© 2016 John Wiley& Sons Ltd
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